Once signed there is no turning back! Always do a thorough contract review first.

Part 1 – Successful Contractor Notification

You have been made aware that you are the successful contractor following a recent bid. Congratulations, allow yourself the pat on the back, but before you celebrate too hard remember that the victory dance cannot be performed until the order is fully agreed and the below has been completed.

Part 2 – Pre-Contract

Firstly, do not carry out any works whatsoever until you receive the order, no matter how hard your client pushes you. If the works they require you to perform are so drastically required then surely they can type up a contract!

Worst case scenario, to get these drastic initial project requirements started prior to receiving the Contract you may commence works under a valid Letter Of Intent (see our blog on LOIs here to ensure that the Letter Of Intent is a contractually binding document otherwise you may be working for free).

Part 3 – Contract Receipt

You have now received the Contract offer, you must allocate some time to accurately review this document confirming all details are correct and reflect your proposal. This is your only chance to do so, so don’t pass up this opportunity. Remember, do not commence with any works until the contract has been reviewed, negotiated, agreed and signed by all parties.

Why Contract review is so important

If you were to commence with any works prior to the final agreement of the contract, it may be deemed that you have accepted the contact in its initial form as it was originally issued to you from your client and all your comments and negotiations are then voided.

Case law shows us this in historic disputes, if the receiving party to the contract commences works following the receipt of the initial contract documents this is deemed as acceptance of the received contract and therefore the binding agreement, all negotiations after the date of commencement are voided if work has commenced by the receiving party until a point where both parties to the contract sign the negotiated document. This negotiation period can often be lengthy so ensure, that as the receiving party to the contract, you do everything in your power to get the contract signed ASAP.

Part 4 – Contract Review, the “Agreement”

The first thing to check is if the offered contract is in line with the contract that you were informed you would be working under at the time you tendered for the works. Often, the client will change the contract or his amendments to a more onerous document than the one initially issued as part of the tender information.

Secondly, you should read the agreement part of the contract to ensure that the company names, company numbers and company addresses are correct. Following this you will see any further agreements within the contract (see the list below).

Avoiding ‘dirty tricks’

Follow our guidance on each point to help you highlight any potential ‘dirty tricks’ that your client has attempted to slip in to your obligations (please note that this list is not exhaustive:

1. Definitions – Check the definitions of the Contract to ensure that all words have the expected meaning.
2. Insurance requirements – do your current policies comply with the requirements?
3. Scope of Works detail – Is this correct and as per your tender?
4. Price – Is the price correct and as per you last quotation or agreement?
5. Main Contract Link – Is another Contract referred to in your Contract? If so, are you to “Understand” the other Contract, or “Comply” with it? If you are to Comply with the Contract then ensure that you receive a copy of it. Do not sign up to accepting it if you can only view it within your employing parties office.
6. Programme – are the detailed Commencement and Completion dates acceptable? Are there any Sectional Completion requirements? Is there a Programme? You must review these carefully to ensure you can comply with the requirements.
7. Retention and Defects – What is the Retention percentage, is this acceptable? Is the defect period acceptable?
8. Liquidated and Ascertained Damages (LADs) – Are you liable for the entire amount or only your proportion of the Damages based on your Contract Value against the Employing Parties overall Contract Value? Are the LADs capped? If the LADs are not detailed then this may also be an issue as the LADs have no limit.
9. Applicable Law – Is the Contract to be under English Law?
10. Documents of Highest Precedent – If there is any ambiguities or conflict between any documents? If so, which one has the highest precedent and its contents shall overrule the other documents?
11. Contract Base Date – Is a reference date from which changes in conditions can be assessed? Do you require any historic pre-contract agreements to form part of this contract?
12. Discounts (MCD) – Some contracts detail a Discount requirement, this is more recently detailed at 2.5% (Historically detailed at 1/39th of the contract value), did you agree to any discounts with your quotation? If you accept this discount the detailed amount shall be deducted from your quotation amount and you cannot recover this money!
13. Schedule Of Rates or Bill Of Quantities – Did you agree to prepare a SORs or BOQ to form part of the contract? Many contracts detail that you are to issue these documents or face heavy fines or deductions until you do.
14. Attendances – This is generally an agreement drawn up between the parties covering the agreement of particulars. This may detail who is providing the site cabins, scaffolding, etc. Make sure you are not being expected to provide anything you haven’t included for in your bid.
15. Numbered Documents – It is becoming common practice for the numbered documents of a contract to be a huge list of documents. Some of these you may have seen during the tender period and some may be newly listed documents.
    If you sign the contract without commenting or removing these documents then they form part of the contract and you are deemed to have included for them. Also, another trick that is often played is to include the most recent revision of the documents within the contract, not the tendered documents. The differences can be hugely significant; again if the revisions are not reset to reflect the tendered documents within the contract then you are deemed to have accepted the requirements as detailed in the contract.

Part 5 – Contract Review, the “Conditions”

Many clients make amendments to the standard conditions of contracts such as the JCT, NEC, etc. Generally speaking there is no reason for the amendments to have been created other than to swing the contract in favour of the issuing party. All amendments need to be studied to see if they are acceptable and what the implications of working under these clauses may be.

Don’t take any chances, if you are unsure about the contract you are about to sign, get in touch with our friendly team of legal construction experts today…

Get in touch

For more information and specialised support and advice, get in touch with our expert team at Contract Rite today. Tel: 01780 243 127 or email: consultants@contractrite.com